Business Planning and Divorce

| May 14, 2020 | Business Law |

Because Wisconsin is a community property state, it is natural for some concern to develop when a business owner confronts the issue of a divorce. Community property laws call for a 50/50 division of the property and assets acquired during a marriage. As noted by the World Population Review, this may include both real property and financial assets such as stocks, earned interest and retirement plans.

Depending on the circumstances, a business that started before the marriage may remain in your control if you can show that your spouse made no contributions to its management, upkeep or financing. To maintain ownership of a business that began after the marriage, however, you may need to take certain proactive steps.

Prenuptial and postnuptial agreements outlining ownership status

Wisconsin courts will typically enforce a detailed and signed agreement outlining what post-divorce ownership arrangements you and your spouse have agreed to. This does not, however, mean that the agreement is dispute-proof. If your spouse attempts to prove that the agreement came about under duress or you hid certain assets, you may face a courtroom battle. As reported by CNBC, transparency can play a major role in how well a prenup or postnup turns out in court.

Buyout agreements

Businesses structured as partnerships generally use buyout agreements to predetermine how the ownership status and company assets will alter when a partner leaves. The agreement typically details how much cash will compensate an exiting partner for her or his efforts and investment into the business. The same approach can work for a business viewed as marital property. Like any other well-written and effective business agreement, clarity, thoroughness and transparency could help ensure that the courts enforce a buyout involving marital property.

Trusts and other options

Other options exist that may effectively serve the needs of a divorcing business owner hoping to maintain control of a company or its assets. Couples may agree to mix-and-match deals that trade-off ownership rights to various properties and holdings. In many cases, setting up a well-designed business trust fund may be an effective proactive approach to consider.